nd str and n rastr        t re     9.21
     tax and tariff, and disadvantages emanating from                 than 500. In China, the comparable
     the international trading environment compared                   numbers are about 15 per cent and
     to the competitors. In addition, the leather and                 28 per cent respectively).
     footwear sector faces the specific challenge relating (iii) Tax and Tariff Policies: Tax and tariff
     to policies that prevent converting its comparative         policies create distortions impeding
     advantage—abundance of cattle—into export                   India’s export competitiveness. In the case
     opportunities. India still has potential comparative        of apparels, there are two sets of policies
     advantage in terms of cheaper and abundant                  both of which impede competitiveness
     labour, but these are nullified by other factors. A         in man-made fibres and favour instead
     brief idea about the challenges are as given below:         cotton-based exports. This is serious
          (i) Logistics: On logistics, India is                  because internationally, world demand
              handicapped relative to competitors in             is shifting strongly towards man-made
              a number of ways. The costs and time               fibres. Similarly, while world’s exports
              involved in getting goods from factory to          are shifting from leather to non-leather
              destination are higher.                            footwear, India imposes higher tax on the
         (ii) Labour regulations: Labour cost is one             latter.
              advantage to India but it is also not        (iv) Discrimination in export markets: India’s
              working in its favour. The problems are
                                                                 competitor exporting nations for apparels
                                                                 and leather and footwear enjoy better
                   regulations on minimum overtime               market access by way of zero or at least
                   pay (the Minimum Wages Act 1948               lower tariffs in the two major importing
                   mandates payment of overtime wages            markets, namely, the USA and EU
                   at twice the rate of ordinary rates);         (European Union):
                   lack of flexibility in part-time work;
                                                                      Bangladesh’s exports enter the EU
                   onerous mandatory contributions                    mostly duty free (former being a Less
                   (employees funds) that become de                   Developed Country), while Indian
                   facto taxes for low-paid workers in                exports of apparels face average tariffs
                   small firms that results in a 45 per               of 9.1 per cent.
                   cent lower disposable salary {due to
                                                                      Vietnam could also attract zero tariffs
                   their contributions to the Employee
                                                                      once the EU–Vietnam FTA (Free
                   Provident       Fund       Organisation
                                                                      Trade Agreement) comes into effect.
                   (EPFO), Employee Pension Scheme
                   (EPS), Labour Welfare Fund                         In the US, India faces tariff of 11.4
                   (LWF), Employees’ Deposit Linked                   percent. Ethiopia, which is an
                   Insurance Scheme (EDLI), and                       emerging new competitor in apparels
                   Employee State Insurance (ESI) etc.}.              and leather, enjoys duty free access in
                   apparel and leather firms in India                 US, EU and Canada.
                   are smaller compared to firms in say               Indian leather exports also face high
                   China, Bangladesh and Vietnam (an                  tariffs in partner country markets in
                   estimated 78 per cent of firms in                  exports of leather goods and non-
                   India employ less than 50 workers                  leather footwear, with considerable
                   with 10 per cent employing more                    added disadvantage in Japan.